Tomkins has cast a bleak outlook for the coming year as the US housing market shows little sign of recovery.

The engineering group, which was forced to issue a profit warning in September, said: "The overall outlook for our markets in 2007 is difficult, particularly when compared to the first half of 2006.

"This, together with the weak US dollar, is expected to impact the comparison with [the] prior year for the group."

Shares in Tomkins fell 6.5p to 268.75p in early trading.

The deteriorating US market for new houses resulted in a 6.9 per cent fall in pre-tax profits to £244.8 million for the year to December 30, 2006, although sales edged up 6 per cent to £3.1 billion.

Net debt over the year rose to £403 million from a previous £334.5 million.

Nevertheless, the company said that it would increase its full-year dividend by 5 per cent to 13.89p.

Tomkins supplies products to the US housing markets, including air system components, bathware and doors and windows.

The company said that the demand in renovation had held up in the US, but that it was the new-housing market that was difficult.

Since its third-quarter profit warning last year, Tomkins has cut 3,000 jobs from its North American operations.

It said that although no further redundancies were planned at the moment, it was keeping the matter under review.

Tomkins is also selling off a number of non-core assets, including its contract engineering business Dearborn Midwest, which generates about $200 million (£102 million) in revenues.

As part of its plans to reduce capital expenditure and working capital, Tomkins is putting some projects on hold, including expanding its bathware business capacity on the West Coast of the US.

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